3 guidelines for better promo budgets

Build your budget each year from scratch and base it on brand need, instead of relying on the previous year's needs and gauging the amount you'll spend against the amount your competitors are spending.

The process of developing a promotional budget for your brand can be mysterious. It's easy to fall back on the previous year's numbers, or to simply duplicate what the competition is spending. Or you might decide to base your budget on a percentage of the sales your product attains. But while these factors should enter into a brand manager's budget plan, they should not drive it.

Instead, promotional budgets should be built from scratch and based on brand need.

Here are three guiding principles to help you make sound decisions, based on realities regarding your product, the market, and the outcomes you want to achieve.

1. Know your brand and the market it serves.

You've got to know the brand thoroughly before building a budget. How compelling is its promise? How strong is the competition? Does your company have a lot of goodwill from which to leverage or is it unknown?

How easy is it to reach your target audience?

How aggressive are your sales and market-share goals?

The answers to such questions will help determine how much or how little you need to spend.

2. Be realistic—and honest.

Once you know your brand, take a realistic look at it to gauge how difficult it might be to market. If the product fills a genuine need that many people have, works well and is unique, people will adopt it quicker than they might a product that is considered “nice to have” or that merely performs the same function as something already on the market.

Trusted agency partners can provide an objective perspective on the brand's legitimate claims in the marketplace. No amount of advertising can sustain an inferior product!

3. Remember life cycle stage.

Is your brand about to launch? Or is it already established with a loyal following? Or is it likely to become outmoded because of the arrival of a competitive product whose benefits seem more robust?

Consider, too, where the brand is in the span of its life cycle, and you'll have a much better understanding of what its needs are.

Brand teams should spend proportionately more at launch than during any other phase of a product's lifetime. There is considerable evidence that strong early marketing support has a significant effect on sales over the entire lifetime of a brand.

Creating a promotional budget, an important component of the marketing communication plan, should from inception involve collaboration between the brand manager and the agency. For this process to be most effective, client and agency must trust each other and be willing to exchange vital information.

A good agency partner will help the brand manager spend budget money wisely, so that together they will deliver better results and better ROI from the promotional budget.